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Workforce costs, inflation causing ‘perfect storm’ for Indiana hospitals

Increases in labor costs, pharmaceuticals and supplies are creating a financial strain on Indiana’s hospitals, according to a report by the state’s hospital association.

“Taken together, these challenges are incredibly daunting for our health care system, our patients, and our communities,” Brian Tabor, president of the Indiana Hospital Association, said in a statement. “The perfect storm is brewing and we must make sure hospitals and caregivers have the resources they need to provide access to the high-quality health care Hoosiers rely on – 24 hours a day, seven days a week.”

The organization surveyed its members to gain financial performance information on the second quarter of this year. Seven Indiana-based health systems in the association reported losses of about $3 billion. One-fifth of hospitals lost 20% or more of days of cash on hand during the quarter.

The Center for Healthcare Quality and Payment Reform, a national policy center focused on designing and implementing payment systems leading to affordable patient-centered care, has a dire warning for Indiana health care systems. The organization said Indiana has the highest risk of hospital closures among its surrounding states with 38% of rural hospitals at immediate risk of closing due to the continuing financial losses and lack of reserves to sustain operations.

“These financial impacts are hitting while hospitals are rebuilding from the peak of the pandemic which stretched our resources beyond belief just earlier this year,” Tabor said.

The Medicare Payment Advisory Commission is projecting the negative margins will grow for hospitals during the remainder of 2022. More than 80% of all Indiana hospitals have 67% of inpatient costs paid by Medicare or Medicaid. About half of the state’s hospitals have greater than 75% of inpatient costs paid by the federal medical plans.

The survey found more than half of hospitals increased salaries and benefits by 15% or more. One-third of hospitals reported labor costs increased nearly 30% during the quarter. The cost of travel nurses increased 20% for approximately 70% of Indiana’s hospitals.

The report stated 75% of hospitals paid up to 15% more on critical medical supplies, like syringes, gloves and other personal protective equipment. It found 57% of hospitals reported their cost of pharmaceutical drug supplies increased by at least 10%.

This article originally appeared on The Center Square.

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